MANILA-- The Bangko Sentral ng Pilipinas' (BSP) policy-making Monetary Board (MB) on Thursday kept key rates steady, which is widely expected by the markets.
In a briefing, BSP officer-in-charge Nestor Espenilla Jr. said the overnight borrowing or reverse repurchase (RRP) remains at three percent, maintained since May 2016 before the implementation of the Interest Rate Corridor (IRC) in June last year.
Rate of the overnight lending or repurchase (RP) rate, the special deposit account (SDA) rate, and the reserve requirement ratio (RRR) were also kept steady at 3.5 percent, 2.5 percent and 20 percent, respectively.
"The Monetary Board's decision is based on its assessment of inflation dynamics and the risks to the inflation outlook over the policy horizon," Espenilla said.
Espenilla said latest baseline forecast for inflation indicated that inflation would remain within the government's two to four percent target over the horizon despite acceleration of the rate of price increases in recent months.
"Inflation expectations area also aligned with the inflation target over the policy horizon," he said.
The BSP governor, however, said that balance of risks to inflation was on the upside due to possible hikes in electricity rates and initial impact of the government's fiscal program, which Finance officials expect to achieve in the second half of 2017.
He said impact of these factors on inflation were seen to be countered by developments in the global growth prospects.
"The Monetary Board stressed that while the global economic environment has become more challenging due to expected shifts in macroeconomic policies in advanced economies, including the ongoing normalization of monetary policy in the US, domestic economic activity is expected to stay firm, supported by buoyant household consumption and private investment, increased fiscal spending, and ample credit and liquidity," he said.
With these factors, Espenilla said the Board believed that current monetary policy remained appropriate.
"Going forward, the BSP will continue to monitor and assess evolving economic developments and will calibrate its policy tools as appropriate to ensure sustained price and financial stability," he added.
BSP Deputy Governor Diwa Guinigundo, during the same briefing, said adjustment of the RRR "is always on the table."
He said the MB recognized that the country had a high level of reserve requirement but since domestic liquidity remained high, domestic demand was still firm, and credit growth remains strong, thus the Board decided to keep it steady.
"It (RRR adjustment) will be considered at some point in the future when conditions are more conducive to an adjustment in the reserve requirement," he added. (PNA)
Source: Philippines information agency